SMM Evening Comments (Jul 31) : Shanghai base metals mostly declined

SHANGHAI, Jul 31(SMM) – SHFE nonferrous metals fell for the most part on Friday July 31, but zinc ended 1.8% higher following after a broad rally in the early morning as official purchasing managers' index (PMI) data showed that China’s economy continued its strong recovery in July.

Investors digested data showing a record contraction in US economic activity in the Q2 and a rise in US jobless claims.

China will stay committed to deeper reform and wider opening-up, and will step up efforts to expand domestic demand and increase the vitality for economic development, according to a meeting of CPC leaders on Thursday.

Copper trimmed gains from early trades this morning and ended 0.02% lower. Tin shed 0.45%, nickel fell 0.22%, aluminium declined 0.24% and lead edged down 0.03%, while zinc surged 1.8%.

The ferrous complex traded mostly higher as iron ore climbed 1.31%, rebar increased 0.32%, hot-rolled coil rose 0.94%, stainless steel grew 1.66% and coke went up 1.12%.

SMM data showed that the operating rates of blast furnaces at Chinese steelmakers inched up this week, as mills resumed production after logistical disruptions caused by heavy rain and floods eased. The operating rates of EAF steelmakers also climbed, for the third consecutive week as of July 29.

Copper: The most-active SHFE 2009 copper contract finished the day 0.02% lower at 51,820 yuan/mt in choppy trading. Disruptions of coronavirus to economies beat expectations. The US economy saw the biggest quarterly plunge in history. GDP from April to June plunged 32.9% on an annualised basis. This, coupled with continued widespread of the virus, worsened inventors’ pessimistic expectations and pressured copper prices. However, China’s manufacturing has recovered steadily, with PMI for the sector standing above 50 for five straight months, according to data from National Bureau of Statistics (NBS). Whether support from longs could bolster the contract higher will be watched tonight.

Aluminium: The most-liquid SHFE 2009 aluminium contract surged to a session-high of 14,770 yuan/mt before relinquishing earlier gains and ending 0.24% lower at 14,685 yuan/mt today. Open interest lost 4,514 lots to 129,000 lots. Warrants rose nearly 5,000 mt.  

Zinc: The most-active SHFE 2009 zinc contract fluctuated mildly around the daily moving average before breaking through 19,000 yuan/mt and closing 1.79% higher at 19,080 yuan/mt today. Social inventories extended declines, and domestic zinc ingot output is not likely to rise significantly in the short term. The contract is likely to steady above 19,000 yuan/mt tonight.

Nickel: The most-traded SHFE 2010 nickel contract ended 0.22% lower at 110,440 yuan/mt today in choppy trading. The contract is likely to fluctuate around 110,000 yuan/mt as it approaches the weekend.

Lead: The most-traded SHFE 2009 lead contract ended its five-day increase and closed 0.03% weaker at 15,705 yuan/mt today, before surging to an intraday high of 15,725 yuan/mt. But the contract is likely to maintain an upward trend in the short term considering the upcoming high consumption season.    

Tin: The most-liquid SHFE October tin contract closed 0.45% weaker today at 146,620 yuan/mt in choppy trading. Pressure above is seen from 173,000 yuan/mt, while support below is seen from 145,200 yuan/mt tonight.